Published: Tue, October 09, 2018
Economy | By

Iranian oil exports drop further

Iranian oil exports drop further

US sanctions will target Iran's crude oil exports from November 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.

Oil prices rose on Tuesday as more evidence emerged that crude exports from Iran, OPEC's third-largest producer, are declining in the run-up to the re-imposition of US sanctions and as a hurricane moved across the Gulf of Mexico.

"It has been quite a tough process to negotiate", said Sanjay Sudhir, a joint secretary handling global cooperation in the Oil Ministry, in reference to efforts to diversify supplies and reduce Iranian imports.

A second round of sanctions targeting Iran's oil sector is due to go into effect on November 5. India and Turkey have also dismissed the unilateral American measures.

Increasing tensions between the United States and Venezuela; the U.S. demanding an end to all imports of Iranian oil by early November; and the rupee's performance as Asia's worst performing currency of the year have compounded the situation and put India in a hard spot.

Seemingly in defiance of the US call for sanctions on Iran, two Indian state-run oil companies have placed orders for Iranian oil to be delivered in November, Petroleum Minister Dharmendra Pradhan said on Monday.

Pradhan told "The Energy Forum" in New Delhi that the world's third-largest oil importer was not waiting to see whether it would receive a waiver from United States sanctions or not.

With US sanctions on Iran looming, Moody's Investors Service had estimated a $500 million decline in earnings for Indian state-owned refiners, IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) on account of substituting crude oil imports from the Persian Gulf country.

Reuters said that Indian Oil would buy six million barrels of oil and Mangalore Refinery and Petrochemicals three million barrels.

Amid growing uncertainty of the repercussions of the Iranian sanction, Indian imports from Iran have shrunk, though the Indian government had indicated it would continue with the Iranian oil imports.

This would be a hugely controversial move as it would bypass the U.S. sanctions as nearly all world oil is traded using the dollar.

On Monday, British daily the Financial Times said European finance ministers will meet US Treasury Secretary Steven Mnuchin in Bali this week and pressure him on allowing Iran to have access to SWIFT. But other world powers that signed the agreement - Russia, China, Britain, Germany, and France - have said they will help Iran circumvent the sanctions and keep selling its oil.

Iran is India's third-largest oil supplier behind Iraq and Saudi Arabia. Buying oil from Iran is a good option for India because of the 60 days of credit and practically free shipping and insurance.

The primary market driver, however, is a report which showed Iran's crude exports fell further in the first week of October, according to taker data and an industry source.

"Notwithstanding all the pressures that the Americans are creating on the oil issue, Iran has its own oil customers, and the work is going on in a way that no problems will arise", he told a parliament session in Tehran. On Monday, Russian Foreign Minister Sergei Lavrov and his Iranian counterpart Mohammad Javad Zarif discussed energy cooperation in a telephone call.

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